Gaming the system

Published: Wednesday, July 3, 2013 at 7:32 a.m.

Last Modified: Wednesday, July 3, 2013 at 7:32 a.m.

There are several ironies in North Carolina’s clumsy efforts to eradicate online “sweepstakes parlors” that have sprung up, in various guises, like mushrooms in a damp cellar. It’s ironic that the state, which runs an “education lottery,” is intent on shutting out this lesser form of gambling. It’s ironic that the online gaming industry sanctimoniously touts jobs it creates for North Carolina families while preying on people who are addicted to gambling.

Most ironic of all may be how well the industry has beaten the odds, at least so far, finding loopholes in state laws intended to shut down this insidious form of gambling. Staff Writer Emily Weaver detailed this saga in a pair of articles titled “Hendersonville aiming to force out sweepstakes parlors” and “Seven years later, sweepstakes battles continue.”

North Carolina banned video poker machines shortly after it enacted the state lottery in 2006, but the purveyors of online gambling were crafty. No sooner had video poker been banned than electronic gaming machine shops, some operating under the guise of Internet cafes, started popping up across the state.

Operators said their consoles were not poker machines but computer-generated games with predetermined odds, played for the purchase of Internet time or phone cards.

Lawmakers said the games looked strikingly similar to the ones once played on the video poker machines. They moved to outlaw “server- based electronic game promotions” in 2008. Operators just found another loophole, replacing prepaid phone cards with ID numbers. In 2010, the General Assembly voted to make it illegal for any machine “to conduct a sweepstakes through the use of an entertaining display.” The industry appealed, arguing that a prohibition on the games violated its First Amendment rights. In December, the North Carolina Supreme Court upheld the state’s new law. Now the gaming industry is appealing the matter to the U.S. Supreme Court.

The high court is unlikely to review, let alone overturn, North Carolina’s law, but not all of the online gaming businesses have left town. After the state Supreme Court’s ruling, businesses were given 20 days to conform to the law. Cafe owners asked a judge for a temporary restraining order. They claimed that a recent change in software put the machines in compliance with state law, but their request was dismissed.

Like the state, Hendersonville and other municipalities have passed laws unfriendly to the online gaming industry. The latest is a proposal by the City Planning Board to allow gaming establishments only in the city’s Industrial-1 district. The city tried to do this once before, but a number of sweepstakes parlors already in business were allowed to stay put.

Now the city is proposing to get rid of this grandfather clause and force sweepstakes businesses back into the I-1 district in the event the industry wins its fight against the state. City Council will hold a public hearing on the measure at 5:45 p.m. July 11. City residents should turn out and express their feelings. An industry that continually exploits every legal loophole in an effort to part people from their dollars should not expect localities to roll out the welcome mat.

<p>There are several ironies in North Carolina's clumsy efforts to eradicate online “sweepstakes parlors” that have sprung up, in various guises, like mushrooms in a damp cellar. It's ironic that the state, which runs an “education lottery,” is intent on shutting out this lesser form of gambling. It's ironic that the online gaming industry sanctimoniously touts jobs it creates for North Carolina families while preying on people who are addicted to gambling.</p><p>Most ironic of all may be how well the industry has beaten the odds, at least so far, finding loopholes in state laws intended to shut down this insidious form of gambling. Staff Writer Emily Weaver detailed this saga in a pair of articles titled “Hendersonville aiming to force out sweepstakes parlors” and “Seven years later, sweepstakes battles continue.”</p><p>North Carolina banned video poker machines shortly after it enacted the state lottery in 2006, but the purveyors of online gambling were crafty. No sooner had video poker been banned than electronic gaming machine shops, some operating under the guise of Internet cafes, started popping up across the state.</p><p>Operators said their consoles were not poker machines but computer-generated games with predetermined odds, played for the purchase of Internet time or phone cards.</p><p>Lawmakers said the games looked strikingly similar to the ones once played on the video poker machines. They moved to outlaw “server- based electronic game promotions” in 2008. Operators just found another loophole, replacing prepaid phone cards with ID numbers. In 2010, the General Assembly voted to make it illegal for any machine “to conduct a sweepstakes through the use of an entertaining display.” The industry appealed, arguing that a prohibition on the games violated its First Amendment rights. In December, the North Carolina Supreme Court upheld the state's new law. Now the gaming industry is appealing the matter to the U.S. Supreme Court.</p><p>The high court is unlikely to review, let alone overturn, North Carolina's law, but not all of the online gaming businesses have left town. After the state Supreme Court's ruling, businesses were given 20 days to conform to the law. Cafe owners asked a judge for a temporary restraining order. They claimed that a recent change in software put the machines in compliance with state law, but their request was dismissed.</p><p>Like the state, Hendersonville and other municipalities have passed laws unfriendly to the online gaming industry. The latest is a proposal by the City Planning Board to allow gaming establishments only in the city's Industrial-1 district. The city tried to do this once before, but a number of sweepstakes parlors already in business were allowed to stay put.</p><p>Now the city is proposing to get rid of this grandfather clause and force sweepstakes businesses back into the I-1 district in the event the industry wins its fight against the state. City Council will hold a public hearing on the measure at 5:45 p.m. July 11. City residents should turn out and express their feelings. An industry that continually exploits every legal loophole in an effort to part people from their dollars should not expect localities to roll out the welcome mat.</p>